1. A railroad company, in aid of which Congress granted land,
entered, September, 1876, into a contract with the United States to
transport for four years the mails over its road at a price which
conformed to the statute then in force. It received from the
Postmaster General due notice of his orders, reducing the rates of
compensation, pursuant to the Act of July 12, 1876, c. 179, 19
Stat. 78, and the Act of July 17, 1878, c. 269, 20
id.
140. The company protested against the order, but performed the
stipulated service.
Held that it is entitled to recover
the contract price therefor.
2. Those acts apply only to contracts thereafter made, or to
such as did not require the performance of the service for a
specific period.
The Chicago and Northwestern Railway Company owns and operates
lines of railroad of which parts were constructed by companies
which severally received from the United States, to aid in their
construction, grants of public lands, to which was attached this
condition:
"The United States mail shall be transported over such roads,
under the direction of the Post Office Department, at such price as
Congress may by law direct,
provided that until such price
is fixed by law, the Postmaster General shall have the power to
determine the same."
Act of May 15, 1856, c. 28, 11 Stat. 9; Act of June 3, 1856, c.
42,
id. 18.
In September, 1875, the company entered into three contracts in
writing with the United States, acting by the Postmaster
Page 104 U. S. 681
General, each for conveying the mail on a certain route numbered
and described therein over a part of its line for four years from
July 1, 1875, at a fixed price per annum, being at the rate of a
specified sum per mile. These contracts are in the usual form
prescribed by the department, and specify the services to be
performed, among other things requiring the company to convey, free
of charge, all mailbags and post office blanks, and all accredited
agents of the department free of charge, and to collect from
postmasters on the route quarterly balances due from them to the
government and account for the same, and stipulate for the payment
of fines to be imposed upon the company for certain defaults. The
ninth clause of each is as follows:
"That the Postmaster General may discontinue or curtail the
service, in whole or in part, whenever the public interests in his
judgment shall require such discontinuance or curtailment for any
cause, he allowing, as a full indemnity to the contractor, one
month's extra pay on the amount of service dispensed with and a
pro rata compensation for the amount of service retained
and continued."
These contracts were made by the Postmaster General under the
authority of the following sections of the Revised Statutes:
"SEC. 3942. The Postmaster General may enter into contracts for
carrying the mail, with railway companies, without advertising for
bids therefor."
"SEC. 3946. No contract for carrying the mail shall be made for
a longer term than four years, and no contract for carrying the
mail on the sea shall be made for a longer term than two
years."
The prices agreed to be paid were in conformity to the
provisions of sec. 1 of the Act of March 3, 1873, c. 231, 17 Stat.
558, being sec. 4002 of the Revised Statutes.
In the Act of July 12, 1876, c. 179, making appropriations for
the service of the Post Office Department &c., Congress
inserted the following provisions,
viz.:
"That the Postmaster General be, and he is hereby, authorized
and directed to readjust the compensation to be paid from and after
the first day of July, 1876, for transportation of mails on
railroad routes by reducing the compensation to all railroad
companies for the
Page 104 U. S. 682
transportation of mails ten percentum per annum from the rates
fixed and allowed by the first section of an act entitled 'An Act
making appropriations for the service of the Post Office Department
for the fiscal year ending June 30th, 1874, and for other
purposes,' approved March 3, 1873, for the transportation of mails
on the basis of the average weight."
"SEC. 13. That railroad companies whose railroad was constructed
in whole or in part by a land grant made by Congress on the
condition that the mails should be transported over their road at
such prices as Congress should by law direct, shall receive only
eighty percentum of the compensation authorized by this act."
19 Stat. 79, 82.
On Aug. 18, 1876, the Postmaster General issued an order, which
was communicated to the company, reciting the foregoing provision
relative to the ten percent deduction, and stating that the
Assistant Attorney General of the Post Office Department had
advised, with reference to railway service performed under contract
with the government,
"that when the contract has been made in due form of law with a
railroad company for the transportation of the mails for a term not
yet expired, such contract is not affected"
by the provision.
On Oct. 20, 1876, the Postmaster General issued another circular
reciting that provision, and also sec. 13 of the act of 1876, and
informing the company that as required by that section, a reduction
of twenty percent would be made for mail service performed after
July 1, 1876, upon the routes over the roads aided by land
grants.
To this notice the company replied with a protest against the
proposed reduction, as in violation of its contract.
The Act of June 17, 1878, c. 259, 20 Stat. 140, contains this
provision:
"That the Postmaster General be, and he is hereby, authorized
and directed to readjust the compensation to be paid from and after
the first day of July, eighteen hundred and seventy-eight, for
transportation of mails on railroad routes, by reducing the
compensation to all railroad companies, for the transportation of
mails, five percentum per annum from the rates for the
transportation of mails, on the basis of the average weight, fixed
and allowed by the first section of an act entitled"
"An Act making appropriations for
Page 104 U. S. 683
the service of the Post Office Department for the fiscal year
ending June thirtieth, eighteen hundred and seventy-seven, and for
other purposes,"
"approved July twelfth, eighteen hundred and seventy-six."
On July 29, 1878, the Post Office Department notified the
company that there would be a reduction of five percent from its
compensation under this act, against which the company promptly
protested.
The company performed all the service required by its contracts
during the entire period covered by them, but deductions from the
contract rates were made, in accordance with the notices of the
department, at each settlement, amounting in the aggregate to
$83,310.91, for which the company, on July 14, 1879, after the
contracts had been completely performed on its part, brought the
present suit. The Court of Claims rendered judgment in its favor
for the sum of $876, being the amount of the deductions for the
service performed from July 1 to July 12, 1876, the latter being
the date when the first act, under which they were made, took
effect.
From this judgment the company appealed.
MR. JUSTICE MATTHEWS, after stating the case, delivered the
opinion of the Court.
The power of Congress to direct by law the price at which the
mail service here in question should be performed was expressly
reserved as a condition of the land grants, which formed, in part,
their motive and consideration. But when Congress authorized the
Postmaster General to fix the price by contract, within specified
maximum rates, and for a period of four years, it was an agreement
on the part of the United States that the stipulated compensation
should not be withheld during that period, which it could not
refuse to perform without a breach of the public faith. The
contract was an exercise of the reserved power, with an added
obligation not to exercise it otherwise for the period agreed on,
and we are unable to perceive any ground on which its validity can
be denied. The
Page 104 U. S. 684
stipulations in the contract on the part of the railroad company
transcend its necessary obligations growing out of the acceptance
of the conditions of the land grant, and furnish a sufficient and
distinct consideration for the promise of the government not to
disturb the rates of the contract during the period of its
existence, for there are several stipulations collateral to the
service to be rendered which the government could not have exacted
as due by previous obligation and irrespective of the assent of the
company.
The power to establish the price includes the power also to
declare the period of its duration, and if it be said that any
contract which fixes both the price and its duration must be
construed as subject to the continuous control of the power which
made it, it must also be admitted that no change can be made
without the abrogation of the contract. The government, whatever
power it may reserve over its own agreements, cannot impose new
contracts upon those with whom it deals. It might by a repeal of
the contract, expressly stipulated, restore the previous state and
claim the bare rights it had before, but it cannot do more than
that. It certainly cannot retain the obligation of the contract as
against the company and at the same time vary its own, unless it
has reserved the right to do so in the contract itself.
Some claim of this kind is put forward in the present case, and
the ninth clause in the contracts is referred to as containing such
a reservation. Clearly this confers power upon the Postmaster
General to discontinue or curtail the service in whole or in part,
he allowing, as an indemnity to the contractor, a month's extra pay
on the amount of service dispensed with and a
pro rata
compensation for that retained and continued. But this is not a
power to reduce the compensation for the full service performed or
to alter the terms of the contract. It is true that under this
reservation, the Postmaster General would be authorized to
discontinue the entire service contemplated by the contract, and
the practical effect of that would be to terminate the contract
itself on making the indemnity specified. But in that event, the
contract being at an end, the company would no longer be under any
obligation except that imposed by the original conditions accepted
with
Page 104 U. S. 685
the land grants, and the government could rightfully impose upon
it no others. There is therefore, in the contract itself, no power
reserved to alter the amount of compensation except by a reduction
of the required service. If the government insists upon full
performance of that, it can be only upon the terms fixed by the
contract.
It is argued, however, on the part of the government, that the
legal effect of what was done was to abrogate the old contracts and
make new ones. It is claimed that the passage of the Acts of
Congress of July 12, 1876, c. 179, and of June 17, 1878, c. 259,
and the notices from the Post Office Department that the reductions
assumed to be contemplated by them would be insisted on; the fact
that they were made in the adjustment of accounts, and that the
railroad company, notwithstanding its protest, continued to perform
the service, had the effect to supersede the contracts of 1875, and
substitute new ones in their stead, on the basis of the reduced
compensation. Such, in substance, was the view taken by the Court
of Claims.
In our opinion, that view cannot be maintained. The contracts of
1875 were for four years, and were expressly authorized by law.
They were therefore valid and binding on the United States as well
as upon the railroad company. They contained within themselves a
mode for lessening, or, if deemed best, for discontinuing entirely,
the described service, and provided for a proportionate reduction
of the stipulated compensation. In no other mode could the contract
be changed except by the mutual assent of the parties. Any change
attempted by either otherwise would have been merely a breach of
the agreement, and the United States would have been liable to
damages for its breach on the same principles and to the same
extent as a private party, for which a suitable remedy was provided
by law in the jurisdiction conferred upon the Court of Claims. In
this respect, the relation between the parties was that of perfect
equality in right.
If, in these circumstances, the government not merely accepted
but demanded the performance of the contract service, the
presumption is that it meant to pay the contract price. It would
require positive and express words to negative that presumption. We
find none such in the statutes of 1876 and
Page 104 U. S. 686
1878. Their language may be well satisfied by confining them to
cases where no time contracts for service were then in existence,
and to contracts thereafter to be entered into. They do not
legitimately apply to contracts then existing, whose terms had not
expired, such as those in the present case.
Such was the opinion of Mr. Attorney General Taft, to whom the
Postmaster General submitted one of the contracts on which this
suit is founded for his opinion whether it was affected by the act
of 1876. He replied in the negative, saying:
"In my opinion, Congress did not intend it to have this effect.
The contracts, of which that with the Chicago and Northwestern
Railway submitted by you for inspection is a sample, were
authorized by the law in force at the dates of their execution.
They bound both parties. A breach of them by either would subject
the delinquent to a claim for damages. The Act of July 12, 1876,
was apparently passed with a view to reduce the public expenses.
But it would not have this effect if an equivalent to the reduction
of pay were recoverable under the name of damages, with perhaps the
expenses of litigation added. Therefore I conclude that the
construction most consistent with justice and fair dealing is the
true one,
viz., that as to existing contracts, the rate
remains as stipulated in the agreement during the term therein
mentioned, but that in those cases where no contract prevailed the
reduction should be made."
15 Op.Atty.Gen. 182.
Of course, if it was not the intention of the acts of Congress
referred to to affect the contracts of the company, the erroneous
interpretation of them by the Postmaster General, and his action
under it, cannot give to them any different effect, for the rights
of the parties depend on the law itself. And the performance by the
company of the service required by its contract, notwithstanding
the notice of the intended reduction of the compensation by the
Postmaster General, cannot be construed as a waiver of its rights
or an acquiescence in new proposals, and that whether it had
protested against the erroneous construction of the law or not. For
it had no option. It was bound by its contract to perform the
service, and
Page 104 U. S. 687
its performance was demanded. It was not in a position
absolutely to refuse to carry the mails, for it was bound to carry
them, if offered, on some terms, either prescribed by law or fixed
by contract, and it had the right to do so without prejudice to its
lawful claims, leaving the ultimate right to future and final
decision. It was not the case of a voluntary payment of an illegal
exaction, where the maxim,
consensus tollit errorem
prevents a recovery, because in such case there is the legal
presumption of an abandonment of the claim.
Volenti non fit
injuria. But here the service was to be performed at all
events, just as it was performed, but under which of two claims was
in dispute. Its performance was a condition of both, and cannot
therefore be a bar to either.
We are of opinion for these reasons that the Court of Claims
should have rendered judgment in favor of the appellant for its
whole claim.
Judgment reversed, and cause remanded with instructions to
render a judgment in conformity with this opinion.
